Notes on Taxes (Once Again)
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by Necros Xiaoban
Dear Sweet New Zealand,
The time has come to engage in a debate on taxes and I thus have organized my position for your review. I break the three taxes: Import, VAT, and Income down individually and explain the nature of each, what I think they should be, and why. Hopefully you will come away from reading this treatise with a better understanding of taxes, how they affect you, and what can and cannot be accomplished through them.
::: Import Taxes :::
What are Import Taxes?
Import taxes are taxes paid on goods companies in other countries export to New Zealand. These companies have purchased an export license from Admin for the right to export us.
When a company exports their goods to New Zealand, they set a price for their goods, much as any domestic company does, and just as with domestic company goods, a VAT tax is applied. However, in the case of imported goods an additional Import tax is applied. This tax is added to the price of the goods, and is paid for by the consumer.
Import taxes have the effect of forcing exporters to reduce the price of their goods in order to compete with the domestic market; if the market is selling at $1.50, and the Import tax is 50%, the exporter must sell their goods at $1 in order to stay competitive.
Thus, Import taxes are used to protect domestic businesses by deterring foreign exports from entering the market.
What I think our Import taxes should be:
I fully support a 1% across the board Import tax on all goods and raw materials. This includes domestically available High RM, such as Grain.
Why do I think that?
As I previously stated, Import taxes are used to protect domestic businesses. There are some who will advocate the belief that by raising Import taxes and relieving pressure on domestic companies the price off goods will rise, which will provide higher wages to workers.
Unfortunately, that view is wrong on several counts. For starters, there's nothing to support the belief that businesses will turn their increased profits into higher wages for their workers. As long as they remain competitive in the goods and job markets, they will continue to pocket the maximum possible profit.
Additionally, the difficulty in raising the cost of goods to improve worker's wages is that you don't actually provide the worker with more buying power. When wages rise in lockstep with the cost of goods the worker may seem to be making more money, but when it comes time to purchase food and weapons they will find that they cannot afford any more 'stuff' than before.
So what good comes from low Import taxes? For starters, low Import taxes allow citizens to purchase goods at the absolute best price the world can offer them. As market factors shift in foreign countries, and cheaper labor becomes available, foreign cost of production periodically falls below our own. Through low Import taxes we take advantage of that by getting foreign workers to produce our goods for us.
Another useful advantage of low Importe taxes is that it places pressure on companies in weak or over-saturated markets to close, and opens companies in new, stronger markets where goods are needed. This strengthens our export markets by focusing our workers on producing products that can't be obtained elsewhere.
As a fledgling economy we must import. We need imports of raw materials in order to develop our manufacturing base, and we need imports of manufactured goods to meet our demand until domestic companies can catch up, and thereafter to keep those same domestic companies in check.
::: VAT Taxes :::
What is the VAT?
The VAT, or Value Added Tax, is a tax applied to goods at the time of sale based on the price of the good. The cost of this tax is paid by the consumer and is a flat percentage of the price the company listed it for. If a company sells Q4 Food for $1 each, and the vat is 10%, the consumer will pay $1.10 for it.
What I think our VAT taxes should be:
I fully support a 1% across the board VAT tax on all goods.
Why do I think that?
There's a lot of inelastic demand in certain market sectors. Simply put, there are certain goods everyone has to buy, regardless of what it costs them, like food, or moving tickets for those who are mobile in military or political affairs. Raising the VAT raises the price of goods, which hurts the newer, low skill, low wage players most. For higher skilled, better paid players the rise in prices represents a smaller percentage of their disposable income. It essentially put the greatest burden on players who are most likely to pack up and leave the game. Besides, you can always draw that revenue from....
::: Income Taxes :::
What are Income Taxes?
Income taxes are a percentage of the wage earned by the worker, and are levied each day when the worker is paid. If a worker makes $1 a day, and Income taxes are 10%, the company will pay that worker $1, but the government will take 10 cents, and the worker will be left with 90 cents.
What I think our Income taxes should be:
I am currently an advocate for 10-15% Income taxes across the board, in all market sectors with the one exception of Iron. Iron as a medium region is not productive enough to compete in the global market, and working at Iron companies should be discouraged as much as possible.
Why do I think that?
Congress should consider Income Taxes as their sole source of tax income. The beauty of the Income tax is that it taxes all players as a flat percentage of their income, placing a relatively small burden on new players, while pulling in revenue from older, more experienced players who can afford it.
As for why I chose a range of 10-15%, I did so because I believe that based on our current population that is sufficient to afford a few MPPs. As a theoretical maximum, I would strongly recommend against ever raising taxes beyond 23%, and certainly no further than 25%, but for now believe 15% would be ample enough to support our fledgling nation.
If and when our government should choose to provide more services, or create a highly mobile corps that will change, and we should be prepared to change with it, but for now we should ensure our basic needs are met and build accurate models for future potential income.
Hopefully this has all been helpful, and I'm certainly willing to entertain any questions you may have about the information and ideas I've put forward. If you've got questions, comments, concerns or bits of poetry you'd like me to see and or respond to, drop them in the comment section and I'll get back to you 😉
Sincerely,
Necros Xiaoban
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Comments
govori srpski...
skofjaloka, unfortunately I don't speak any language but English, and I fear the concepts I've put forward here are a little too complicated to trust to Google Translate. If there are any Serbians who'd be willing to translate I'd be happy to let them run a reprinted translation of my article in their own paper if they'd contact me.
imports should be higher, at least for grain.
Necros...it was a joke 😉
...
it's a nice article.
Thanks 😉
interesting reading...
i would like to ask few questions though... and if u care you can even PM me the answer...
btw. i'm not trying to question your opinion but am interested in the subject.
So. why do you think only iron needs higher taxation and not stone, etc.. ?
and what is the difference between medium / high iron, or any other primary sector?
wouldn't taxation of medium primary section at a extremely low cost of like 0-1% make that primary sector comparable to high primary sector taxated at about 15%.
so much for now. 😛
thanks for answers.
As for Iron, it is because New Zealand currently has two raw materials regions: Grain and Iron. Our Grain is High, and thus extremely productive, while our Iron is medium, or only half as productive.
When our workers work in grain companies they produce twice as much Grain as they would Iron, thus being more productive, earning more money for the business, and providing for a stable higher wage.
Without Oil, Stone or Titanium regions, we simply don't have the need to tax them.
I agree with most of what you say, at least at present. There are some areas where I disagree but i think I'll save those for a separate article.
Excellent article, and I agree with this tax plan.
Setting a 50% income tax for iron is a priority. Oil, Stone, and Titanium are not important, but should have the same tax rates as iron to complete the picture.
I pretty much agree with NX on the subject.
I think we should go 3% here
There's no need for the 50% income tax. If people are stupid enough to start companies in these areas, they're stupid enough not to know about any tax.
These stupid people take away workforce from other industries. The 50% income tax will make the workers go back to the efficient industries. It has definitely a steering effect that we should make use of.
erepublik should be set in a way, that a company on high primary sector could have more people employed (for optimum production) in comparison to a region with medium primary sector... should it be grain, stone, oil or titanium..
so like grain company on medium grain region would have optimum production with 4-5 people, while on high grain region optimum production would be at 10 as it is now...
that should be enough drawback 😛
anyway, nothing to do with taxes... 🙂
You should have just linked us to here:
http://www.erepublik.com/en/country/economy/USA
Maybe a minor import tax on grain (10%?), to make it impossible to be undercut by countries with lower income tax
As a investor in Nz and former Min of economy and finances in Portugal, my advice is too mantain a 30/40% import tax on products like grain and food.
Fact:Nz markets is over crowded with national food and grain
Pros:Grain and food companies will have more money to invest in Nz wich increases the productivity of new zealand, and since it will be harder for companies to get more employees, the salaries will be higher.
Cons- In short terms the conssumers will pay a litle bit more for food and grain.
Cult of One Eye strikes again
daniecox
Day 1,075, 06:47
You should have just linked us to here:
http://www.erepublik.com/en/country/economy/USA
Maybe a minor import tax on grain (10%?), to make it impossible to be undercut by countries with lower income tax
xD
Why not oil, stone and titanium incom 50%?
Oil, Stone and Titanium are not producible here, and thus don't require taxes, though I'm sure we will propose them at some point, just for the experience. ^_~
Мислим да порез на доходак су превисоке. Ми треба да заштити домаће фарме зрна са тридесет одсто увоза пореза.
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Great article NX, I agree with you 100%. This is the right tax structure.
An income tax weighs more heavily on workers than on owners. As a business owner, I pay precious little income tax. I pay myself minimum wage, and when I want money, I launder it out of my company through the money market by selling .1 of whatever other nation's crappy currency I have on hand for an outlandish amount of NZD (or IEP in my other company). Any business owner who pays income tax just isn't paying attention, or just doesn't care.
As for import tax -- drop it to one percent, and I'll shut down here and import from my Irish company. I think I would enjoy paying my labor force in weak Irish currency and getting nice strong NZD for my trouble. Of course, every food manufacturer in every backwater craphole of a nation whose currency is worth little more than a turd will have the same idea, and pretty soon, you'll have no New Zealand food companies.
Protect grain because it's your only raw material worth producing, and protect food because it's the backbone of the economy, then drop the import tax on whatever you really need to import.
As for VAT -- If you're going to drop import tax to 1 percent, then make the VAT as high as you want to, because it won't be New Zealand companies paying it.
Gonzo has a point. It's probably a better idea to let businesses have a chance to set up before being stomped all over by imports.
Oh, please NX!
Posting the very same article for the 5th or 6th time (I lost counting!) doesn't necessarily make it right. Just have a look at the comments Alexander Reardon and I have already poste😛
http://www.erepublik.com/en/article/ministry-of-finance-economic-recommendations1-1540527/1/20
Would you please be kind enough as to honour us with an answer?
spyskam: Not sure which question you want answered. Repost it and I'll see what I can do 😉
I reposted because we have changed our tax structure, and I want NZ citizens to understand why ^_~
@gonzo: You yourself acknowledged you're engaging in money laundering. For those who want to evade taxes, they will *always* find a way. There is nothing that I or anyone else can do to compel someone to pay the taxes they as citizens of New Zealand have the duty of paying.
We're working on reducing the strength of the NZD, and we're doing so rapidly. Why Admin gave us .1 GOLD = 1 NZD, I may never know, but expect a move to under .025 GOLD = 1 NZD soon. Once we get it significantly inflated, you'll be wanting to export the fruits of NZ cheap labor to Ireland 😉
"As for VAT -- If you're going to drop import tax to 1 percent, then make the VAT as high as you want to, because it won't be New Zealand companies paying it."
Not sure why you think NZ companies are the only people who matter. We do have the small issue of having to keep our citizens alive and fed in order to run the companies, you know ^_~
Money laundering? Oh, it sounds so . . . so . . . dirty when you put it that way. I prefer to think of as 'currency reallocation.'
But the point is not whether I am paying income tax; rather it is that an income tax weighs more heavily on workers than on owners. And if you base your tax structure solely on income tax as you propose, about 15 percent of us will not pay any, or we'll pay such a trivial amount as to be of little benefit to the state.
And no, it is not all about owners, but you do need jobs, and if you create an economic climate that discourages business by encouraging cheap imports, you won't have any.
Furthermre, with virtually no VAT or import tax, as you propose, you'll gain no tax revenue from imports at all.
If I were only interested in my own fortunes, I would embrace your proposal wholeheartedly. I have a Q4 food company just poised to ramp up production and tap into this deliciously tax-free and strong currency market. But however good it may be for gonzo, I don't think it is good for the country. It may drive down prices, but it will also drive down wages and cause unemployment as New Zealand companies fold under the pressure of cheap imports.